CGTech to be acquired by Sandvik

Sandvik, a global engineering company with about 40,000 employees, has announced that it will acquire CGTech, the company you probably know best as the maker of VERICUT, the CNC verification and optimization software. Sandvik is a publicly-traded company in Sweden and will report CGTech results in its Coromant unit, which is itself a division of Sandvik Machining Solutions.

From the top: Who? If you CNC, you may already know Sandvik. The Sandvik Machining Solutions (SMS) business makes tools and tooling systems, mainly for advanced industrial metal cutting using carbide, specialty ceramics and other hard materials. They’ve recently expanded into additive manufacturing, with metal powders and machines. In 2019, this part of Sandvik reported revenue of SEK 41 billion, or $4.7 billion or so. It’s big, but represented less than half of Sandvik’s total SEK 103 billion (almost $12 billion) revenue for 2019.

GCTech, on the other hand, is not big even though it more or less owns the NC simulation market. Sandvik said in investor documents that CGTech had revenue of $49 million in 2019 — not huge for a company founded in 1988 and with around 180 employees.

But almost everyone uses VERICUT to simulate their CNC processes. In today’s marketing-speak, it creates a digital twin of a part’s manufacturing process. It simulates machining based on the details of the part and the machine and its tool setup. The idea is that VERICUT allows the operator to optimize the process to prevent material waste and unnecessary tool wear, and decrease overall production time.

I wasn’t aware of this, but Sandvik has, for a couple of years, had ambitions for its SMS to “become the world-leading solutions provider to the wider component manufacturing industry” — and believe that CGTech’s NC code simulation, verification, optimization, and programming solutions are a clear differentiator that can help make that happen.

Sandvik CEO Stefan Widing told investors that this is a very strategic acquisition, one that adds a bridge from core machining to manufacturing solutions – which Sandvik sees as a very important piece of its longer-term vision.

Terms of the deal were not announced even though investors pushed hard to get a price. Mr. Widing would only say that “it’s a software company that gets the software multiples you would expect”. The deal is expected to close before the year ends.